Tag: Cryptocurrencies

By Huw Jones

LONDON (Reuters) – Global rules are needed to regulate international crypto firms like Binance and “keep markets clean”, Britain’s Financial Conduct Authority said on Thursday.

Crypto firms are largely unregulated across much of the world but are required in many countries to show they have adequate controls to combat money laundering.

The FCA said last year that Binance, the world’s largest crypto exchange, was not allowed to undertake any regulated activity in Britain because it was “not capable of being effectively supervised”.

This year, regulators in Spain, France and Italy have allowed Binance to operate in their national markets.

“I think some global baseline standards are important,” FCA Chief Executive Nikhil Rathi told the Peterson Institute for International Economics in Washington in response to a question on whether regulators are being played off against each other by crypto firms.

“As we have seen in other sectors like anti-money laundering, these are inherently cross-border activities by some very well organised actors and therefore having good common regulatory standards and information sharing cross-border is fundamental to the clean markets that we all want,” Rathi said.

The regulator has faced a backlash in the crypto sector after turning down applications from scores of companies.

“When it comes to crypto, we are always going to be hawkish around consumer protection,” Rathi said.

The FCA has also long warned that investors in crypto currencies could lose all of their money and Rathi said that unfortunately that has materialised after the recent crash in the value of bitcoin.

The Financial Stability Board, a global regulatory body, said this week it was looking to make draft recommendations to G20 countries in October for regulating crypto assets.

A French member of the European Parliament last month urged France’s markets regulator to review its decision to register Binance.

(Reporting by Huw Jones; editing by Jonathan Oatis)

By Arpan Varghese and Scott DiSavino

(Reuters) – Texas’s power grid operator on Wednesday asked homes and businesses to raise thermostats and cut power use amid stifling heat that threatened to push power demand beyond the state’s available supply.

For the second time this week, the Electric Reliability Council of Texas (ERCOT), which operates the grid that serves more than 26 million customers representing about 90% of the state’s power load, urged residents to cut power use between 2 p.m. and 9 p.m., the hottest hours of the day. It also warned of a risk for rolling blackouts.

Residents should turn up thermostats, defer the use of high-power appliances and to turn off swimming pool pumps. ERCOT said it is also seeking additional reserves and asking some big industrial customers to shut off machinery.

As temperatures once again above 100 degrees Fahrenheit (38 degrees Celsius), higher than the average for this time of the year, the state projected peak demand to hit 78,914 megawatts, and had only 78,790 megawatts committed as of 2:40 p.m. local time, according to its website. It takes precautions when the safety margin is less than 2,300 megawatts.

ERCOT blamed forced outages at coal- and natural gas-fed power plants, and low wind power generation.

“Texans need to know why so many coal & natural gas plants are failing,” energy consultant Doug Lewin tweeted on Wednesday.

ERCOT data showed 2.7 gigawatts less power available from coal and gas plants than on Monday, when the state faced a similar shortfall, said Lewin.

It was the third time this year that ERCOT has called on residents to cut power usage and the second time it has warned of the potential for rolling blackouts. On Monday, it avoided forced cuts when some cryptocurrency miners agreed to halt operations.

Lee Bratcher, president of Texas Blockchain Council, said all of the state’s large-scale Bitcoin mining operations, which consumer about 1,000 megawatts, are currently offline because of ERCOT’s call for conservation and high power prices.

Petrochemical maker LyondellBasell said its Texas operations are working on ways “to reduce electricity demand without shutting down assets or compromising the safety and reliability of our operations,” a spokesperson said.

In February 2021 a grid failure led to the deaths of more than 200 people in freezing weather and prompted an overhaul of the grid regulator.

AccuWeather forecast temperatures in Houston, the biggest city in Texas, will reach 104 F on Wednesday. That would be the hottest day in the city since August 2015 and compares with a normal high of 94 F for this time of year, according to federal data.

(Graphic: Texas power demand to soar to record high this year : https://graphics.reuters.com/TEXAS-POWER/ERCOT/gkplgzymyvb/chart.png)

(Reporting by Arpan Varghese and Scott DiSavino; additional reporting by Laila Kearney Gary McWilliams; Editing by Marguerita Choy)

By Gayatri Suroyo

JAKARTA (Reuters) – G20 finance leaders will meet in Bali this week for talks on issues like global food security and soaring inflation, but there was scepticism from Germany and France over Indonesia’s hopes for common ground as tensions over Ukraine simmer.

Russia’s invasion of Ukraine overshadowed a meeting of foreign ministers from the Group of 20 major economies last week, as Russia’s top diplomat walked out of a meeting and accused the West of “frenzied criticism”.

And at the most recent G20 finance leaders’ meeting in Washington in April, officials from some Western nations left the room when it was the Russian representative’s turn to speak.

Germany is expecting more open and direct discussions with Russia this time around, government sources said in Berlin on Wednesday.

“Most will want to adopt a different approach on the day, after April,” one of the sources added.

But the source put a damper on hopes of agreement on a joint communique following the talks, sought by host Indonesia, saying Russia and China were expected to band together amid tensions with the West over the Ukraine war.

A French Finance Ministry source also said the G20 ministers were unlikely to agree on all issues for a communique, with the economic consequences of the war particularly disputed.

“The question is whether we have a separate declaration from the presidency which denounces the Russian invasion of Ukraine and details the economic risks of the consequences and then a part of the communique, a roadmap, that covers the G20’s current work,” the French source said.

“The G20’s capacity to act and communicate is very strongly hindered by the war in Ukraine which one of the G20 members is fully responsible for,” the source added.

Indonesia hopes to issue a communique – which the April meeting failed to do – when talks wrap up on Saturday, though its central bank governor said if that was not feasible the outcomes would be summarised in a chair’s statement.

“We hope for the best, but of course prepare for the worst,” said Indonesia’s central bank governor Perry Warjiyo.

“I don’t want to speculate, we are still trying very hard to reach a communique,” he said in an interview last week.

Indonesian officials have noted disagreements between Western countries and Russia on how to word a draft communique to describe the state of the global economy and how it is being affected by the war in Ukraine, which Moscow calls a “special military operation”.

U.S. Treasury Secretary Janet Yellen and Japanese Finance Minister Shunichi Suzuki, after a bilateral meeting in Tokyo on Tuesday, blamed the war for volatility in currency markets and for increasing the risk of global recession.

Yellen and Suzuki are due to attend the Bali meeting in person.

Indonesia has said Russian Finance Minister Anton Siluanov will address the meeting virtually, with his deputy travelling to Bali. Ukraine’s finance minister has also been invited and is due to attend one session virtually.

Putting aside issues related to the war, Warjiyo said the G20 had made substantial progress on topics like regulatory principles on crypto and central bank digital currencies.

Indonesia’s G20 deputy for finance, Wempi Saputra, said the group will try to come up with actions to help poor countries tackle a looming food crisis, by ensuring supply and affordability of food and fertilisers.

Other topics on the agenda include the setting up of a fund under the World Bank to better prepare for future pandemics and a Resilience and Sustainability Trust at the International Monetary Fund that could be accessed by countries in need of funds, as well as debt relief for poor countries.

Yellen urged China and other non-Paris Club creditors to cooperate “constructively” in helping low-income countries facing debt distress, saying Beijing’s lack of cooperation has been “quite frustrating”.

Indonesia’s Wempi said a multinational signing of a global tax agreement, initially scheduled on the sideline of meetings, has been pushed back. The Organisation for Economic Cooperation and Development has set a new target for the major tax overhaul to take effect in 2024, instead of 2023.

(Reporting by Gayatri Suroyo, Stefanno Sulaiman and Fransiska Nangoy in Jakarta, Andrea Shalal in Tokyo, Christian Kraemer in Berlin and Leigh Thomas in Paris; Editing by Ed Davies and Michael Perry and Chizu Nomiyama)

By Huw Jones

LONDON (Reuters) – Major stablecoins must comply with the same safeguards as traditional forms of payments, global regulators said on Wednesday, tightening controls over a battered crypto sector.

Stablecoins are cryptocurrencies designed to have a stable value relative to traditional currencies, or to a commodity, to avoid the volatility that makes bitcoin and other digital tokens impractical for most commerce.

IOSCO, a global body for securities regulators, and a committee at the Bank for International Settlements (BIS), a forum for central banks, said on Wednesday they had formally adopted proposals put out to public consultation last October.

The new guidance shows when existing payment sector rules should apply to large stablecoins, marking a major step forward in applying “same risk, same regulation”, they said.

“We expect the same level of robustness and strength in these aspects in systemically important stablecoin arrangements,” Ashley Alder, chair of IOSCO and CEO of Hong Kong’s securities regulator, said in a statement.

The guidance covers managing risks, governance and transparency standards.

“Recent developments in the cryptoasset market have again brought urgency for authorities to address the potential risks posed by cryptoassets, including stablecoins more broadly,” said Jon Cunliffe, chair of the BIS committee and deputy governor of the Bank of England.

TerraUSD stablecoin collapsed earlier this year, while crypto lender Voyager Digital filed for bankruptcy this month.

Bitcoin, the largest cryptocurrency, has slumped some 70% since its November record of $69,000.

Global regulators are set to go further in October when the Financial Stability Board, a global regulatory body which includes IOSCO, proposes “robust” rules for cryptocurrencies more generally.

Global watchdogs are playing catch up with the European Union which this month approved a groundbreaking law to regulate cryptomarkets, including stablecoins.

Britain is due to propose rules to regulate systemically important stablecoins this month as part of a draft law on reforming financial services and markets.

(Reporting by Huw Jones; Editing by Mark Potter)

By Lisa Pauline Mattackal and Medha Singh

(Reuters) – The shrimps of the crypto world have joined the whales in a glorious last stand to banish the bleak bitcoin winter.

These two contrasting groups are both HODLers – investors in bitcoin as a long-term proposition who refuse to sell their holdings – and they are determined to drive back the bears, despite their portfolios being deep in the red.

Shrimps, investors that hold less than 1 bitcoin, are collectively adding to their balance at a rate of 60,460 bitcoin per month, the most aggressive rate in history, according to an analysis by data firm Glassnode.

Whales, those with more than 1,000 bitcoin, were adding 140,000 coins per month, the highest rate since January 2021.

“The market is approaching a HODLer-led regime,” Glassnode said in a note, referring to the cohort whose name emerged years ago from a trader misspelling “hold” on an online forum.

After bitcoin’s worst month in 11 years in June, the decline appears to have abated as transaction demand seemed to be moving sideways, according to Glassnode, indicating a stagnation of new entrants and a probable retention of a base-load of users, ie HODLers.

Bitcoin has been hovering around $19,000 to $21,000 over the past four weeks, less than a third of its $69,000 peak in 2021.

“There is a saying in crypto markets – diamond hands. You’ve not really lost the money, if you’ve not pulled out. There may be a day it might come back up,” said Neo, the online alias of a 26-year old graphic designer at a fintech company in Bangalore.

As the crypto bear market enters its eighth month, his crypto portfolio was down by 70% – though he said it was money he was “okay with losing”. He does not intend to sell, holding out for a possible rebound in the coming years.

Like Neo, most HODLer portfolios are under water, yet many are refusing to bail.

Some 55% of U.S.-based crypto retail investors held their investments in response to the recent selloff, while around 16% of investors globally increased their crypto exposure in June, according a survey of retail investors by eToro.

“Crypto is an asset class disproportionately held by younger investors who are more risk tolerant since they have, say, 30 more years to earn it all back,” said Ben Laidler, eToro’s global markets strategist.

MINERS’ PAINS

Another class of staunch crypto HODLers – bitcoin miners – is increasingly under pressure as they face the double whammy of cratering prices and high electricity costs. The cost of mining a bitcoin is higher than the digital assets’ price for some miners, Citi analyst Joseph Ayoub said.

The unfavorable environment for many of these miners, who have loans against their mining systems, has forced them to pull from their stash.

Core Scientific sold 7,202 bitcoin last month to pay for its mining rigs and fund operations, bringing its total holdings down to 1,959 bitcoin.

While Marathon Digital Holdings said it had not sold any bitcoin since October 2020, the firm said it may sell a portion of its monthly production to cover costs.

The Valkyrie bitcoin miners ETF slumped 65% last quarter, outpacing bitcoin’s 56% fall.

Lessons from the crypto winter in 2018 were that the miners who survived were the ones that kept producing even if they were under water. That approach is unlikely to work this time round though, said Chris Bae, CEO of Enhanced Digital Group, which designs hedging strategies for crypto miners.

For the bosses of mining firms’, Bae added, the focus is now on the “need to think through the next crypto winter and have that game plan before it happens rather than during it.”

(Reporting by Medha Singh and Lisa Pauline Mattackal in Bengaluru; Editing by Vidya Ranganathan and Pravin Char)

(Reuters) – The U.S. Treasury on Tuesday said it was seeking comment on the on the risks and opportunities posed by digital assets as it seeks to prepare a report for President Joe Biden on the implications of developments such as cryptocurrencies.

“For consumers, digital assets may present potential benefits, such as faster payments, as well as potential risks, including risks related to frauds and scams,” Treasury Under Secretary for Domestic Finance Nellie Liang said in a statement.

(Reporting by Costas Pitas in Los Angeles; Editing by Tim Ahmann)

NEW YORK (Reuters) – The U.S. Securities and Exchange Commission on Tuesday delayed a decision on whether to allow a spot bitcoin exchange-traded fund by stock-picker Cathie Wood’s Arc Invest and crypto investment product firm 21Shares US to list and trade on Cboe Global Markets until Aug. 30.

The delay follows a series of rejections this year by the market regulator on ETFs that track bitcoin, including proposals from Grayscale, Fidelity, and NYDIG.

(Reporting by John McCrank; Editing by Chris Reese)

By Dietrich Knauth

(Reuters) – Liquidators for crypto hedge fund Three Arrows Capital (3AC) obtained U.S. court permission on Tuesday to issue subpoenas and lay claim to the bankrupt Singapore-based company’s assets, noting that 3AC’s missing-in-action founders no longer control its accounts.

U.S. Bankruptcy Judge Martin Glenn in Manhattan gave the liquidators authority to claim 3AC’s U.S.-based assets and issue subpoenas to its founders and about two dozen banks and cryptocurrency exchanges that may have information about its assets and transfers.

Adam Goldberg, a lawyer for the liquidators, said at an emergency hearing Tuesday before Glenn that the whereabouts of company founders Zhu Su and Kyle Livingstone Davies remain unknown.

Without the founders’ cooperation, the liquidators have been unable to get a complete view of 3AC’s assets and their location, Goldberg said. The assets’ digital nature creates a real risk that the founders or other parties will whisk them away unless stopped by a court order, he said.

“A key part of this order is to put the world on notice that it is the liquidators that are controlling the debtor’s assets at this stage,” Goldberg said.

Zhu and Davies did not appear in bankruptcy court and did not oppose the liquidators’ request for subpoena authority. Zhu tweeted for the first time in almost a month on Tuesday, saying the liquidators had rebuffed their good faith offer to cooperate.

3AC, which was reported to have $10 billion in cryptocurrency earlier in 2022, held $3 billion in assets as of April, according to the liquidators’ court filing. The company filed for bankruptcy in the British Virgin Islands in late June after being hammered by a sharp sell-off in digital currencies.

3AC’s insolvency has destabilized other crypto lenders like Voyager Digital, which filed for bankruptcy after 3AC failed to repay a loan of about $650 million in cryptocurrency, and Blockchain.com, which loaned $270 million to 3AC.

The liquidators were appointed by a British Virgin Islands court to wind down the company and pay its debts. They filed a parallel bankruptcy case in Manhattan to shield 3AC’s U.S. assets.

(Reporting by Dietrich Knauth, Editing by Alexia Garamfalvi and Richard Chang)

By Tom Wilson and Angus Berwick

LONDON (Reuters) – The world’s largest crypto exchange, Binance, continued to process trades by clients in Iran despite U.S. sanctions and a company ban on doing business there, a Reuters investigation has found.

In 2018, the United States reimposed sanctions that had been suspended three years earlier as part of Iran’s nuclear deal with major world powers. That November, Binance informed traders in Iran it would no longer serve them, telling them to liquidate their accounts.

But in interviews with Reuters, seven traders said they skirted the ban. The traders said they continued to use their Binance accounts until as recently as September last year, only losing access after the exchange tightened its anti-money laundering checks a month earlier. Until that point, customers could trade by registering with just an email address.

“There were some alternatives, but none of them were as good as Binance,” said Asal Alizade, a trader in Tehran who said she used the exchange for two years until September 2021. “It didn’t need identity verification, so we all used it.”

Eleven other people in Iran beyond those interviewed by Reuters said on their LinkedIn profiles that they too traded crypto at Binance after the 2018 ban. None of them responded to questions.

The exchange’s popularity in Iran was known inside the company. Senior employees knew of, and joked about, the exchange’s growing ranks of Iranian users, according to 10 messages they sent to one another in 2019 and 2020 that are reported here for the first time. “IRAN BOYS,” one of them wrote in response to data showing the popularity of Binance on Instagram in Iran.

Binance did not respond to Reuters’ questions about Iran. In a March blog post, published in response to Western sanctions on Russia, Binance said it “follows international sanction rules strictly” and had assembled a “global compliance task force, including world-renowned sanctions and law enforcement experts.” Binance said it used “banking grade tools” to prevent sanctioned people or entities from using its platform.

Iran’s mission to the United Nations in New York did not respond to a request for comment.

The Iranian trading on the exchange could draw interest from U.S. regulators, seven lawyers and sanctions experts told Reuters.

Binance, whose holding company is based in the Cayman Islands, says it does not have a single headquarters. It does not give details about the entity behind its main Binance.com exchange which does not accept customers in the United States. Instead, U.S. clients are directed to a separate exchange called Binance.US, which – according to a 2020 regulatory filing – is ultimately controlled by Binance founder and CEO Changpeng Zhao.

Lawyers say this structure means Binance is protected from direct U.S. sanctions that ban U.S. firms from doing business in Iran. This is because the traders in Iran used Binance’s main exchange, which is not a U.S. company. But Binance does run a risk of so-called secondary sanctions, which aim to prevent foreign firms from doing business with sanctioned entities or helping Iranians evade the U.S. trade embargo. As well as causing reputational damage, secondary sanctions can also choke off a company’s access to the U.S. financial system.

Binance’s exposure would depend on whether sanctioned parties traded on the platform and whether Iranian clients dodged the U.S. trade embargo as a result of their transactions, four lawyers said. Non-U.S. exchanges “can face consequences for facilitating sanctionable conduct, whereby they have exposure for allowing the processing of transactions for sanctioned parties, or if they’re on-boarding those types of users,” said Erich Ferrari, principal attorney at Ferrari & Associates law firm in Washington.

Reuters did not find evidence that sanctioned individuals used Binance.

Asked about traders in Iran using Binance, a spokesperson for the U.S. Treasury declined to comment.

Binance kept weak compliance checks on its users until last year, despite concerns raised by some senior company figures, Reuters reported in January, drawing on interviews with former senior employees, internal messages and correspondence with national regulators. The exchange said in response it was pushing industry standards higher. Reuters’ new reporting shows for the first time how the gaps in Binance’s compliance programme allowed traders in Iran to do business on the exchange.

Binance dominates the $950 billion crypto industry, offering its 120 million users a panoply of digital coins, derivatives and non-fungible tokens, processing trades worth hundreds of billions of dollars a month. The exchange is increasingly going mainstream. Its billionaire founder Zhao – known as CZ – this year extended his reach into traditional business by pledging $500 million to Tesla boss Elon Musk’s planned takeover of Twitter. Musk has since said he is pulling out of the deal. Last month Binance hired Portuguese soccer star Cristiano Ronaldo to promote its NFT business.

“BINANCE PERSIAN”

Since the Islamic Revolution of 1979, the West and the United Nations have imposed sanctions on Iran in response to its nuclear programme, along with alleged human rights violations and support for terrorism. Iran has long maintained the nuclear programme is for peaceful purposes.

Under the 2015 deal between Iran and six world powers, Tehran curbed its nuclear programme in return for an easing of some of the sanctions. In May 2018, President Donald Trump ditched the accord and ordered the reimposition of the U.S. sanctions that were relaxed under the deal. The curbs came back into effect in August and November that year.

After Trump’s move, Binance added Iran to a list of what it called “sanctioned countries” on its terms of use agreement, saying it could “restrict or deny” services in such areas. In November 2018, it warned its customers in Iran by email to withdraw their crypto from their accounts “as soon as possible.”

Publicly, some Binance executives lauded its compliance programme. Its then chief financial officer said in a December 2018 blog it had invested heavily in countering dirty money, saying it took a “proactive approach to detecting and squashing money laundering.” In March the following year, it hired a U.S. compliance platform to help it screen for sanctions risks.

By August 2019, Binance deemed Iran – along with Cuba, Syria, North Korea and Crimea – a “HARD 5 SANCTIONED” jurisdiction, where the exchange would not do business, according to an internal document seen by Reuters. The May 2020 document included Iran on a list of countries headed “strictly no,” citing Chief Compliance Officer Samuel Lim.

Even as Binance’s stance on Iran hardened, its profile among the country’s legions of crypto users was growing, traders said, citing their knowledge of the local industry.

Cryptocurrencies grew attractive there as sanctions took a heavy toll on the economy. Since the birth of bitcoin in 2008, users have been drawn to crypto’s promise of economic freedom beyond the reach of governments. Cut off from global financial services, many Iranians relied on bitcoin to do business on the internet, users said.

“Cryptocurrency is a good way to circumvent sanctions and make good money,” said Ali, a trader who spoke on condition he was identified by only his first name. Ali said he used Binance for around a year. He shared with Reuters messages with Binance customer service representatives that showed the exchange closed his account last year. They said Binance was not able to serve users from Iran, citing recommendations from United Nations Security Council sanctions lists.

Other traders at the exchange cited its weak background checks on clients, as well as its easy-to-use trading platform, deep liquidity and a large number of cryptocurrencies that could be traded as reasons for its growth in Iran.

Pooria Fotoohi, who lives in Tehran and says he runs a crypto hedge fund, said he used Binance from 2017 until September last year. Binance won over Iranians because of its “simple” know-your-customer controls, he said, noting how traders could open accounts simply by providing an email address.

“They succeeded in gaining a huge trading volume, with many pairs of currencies, within a short period of time,” said Fotoohi.

Binance’s Angels – volunteers who share information on the exchange across the globe – also helped spread the word.

In December 2017, Angels announced the launch of a group called “Binance Persian” on the Telegram messaging app. The group is no longer active. Reuters couldn’t determine how long it operated, but identified at least one Iranian who was an active Angel after Washington reimposed sanctions.

Mohsen Parhizkar was an Angel from November 2017 to September 2020, managing the Persian group and helping its users, according to his LinkedIn profile. A person who worked with Parhizkar confirmed his role and shared messages they exchanged. Contacted by Reuters, Parhizkar said Binance had cancelled programmes in Iran because of sanctions. He didn’t elaborate.

After its 2018 ban, at least three senior Binance employees were aware that the exchange remained popular in Iran and was used by clients there, 10 Telegram and company chat messages between the employees that were seen by Reuters show.

By September 2019, Tehran was among the top cities for followers of Binance’s Instagram page, topping New York and Istanbul, one message from the same month shows. The employees then made light of this. One jokingly suggested advertising Binance’s popularity in Iran, saying, “Push that on Binance U.S. Twitter.”

In a separate exchange from April 2020, a senior employee also noted that Iranian traders were using Binance, without saying how he knew this. A Binance compliance document from the same year, reviewed by Reuters, gave Iran the highest risk rating of all countries for illegal finance.

“BEGINNERS’ GUIDE TO VPNS”

Further underpinning Binance’s growth in Iran, traders said, was the ease with which users could skirt curbs via virtual private networks (VPNs) and tools to conceal internet protocol (IP) addresses that can link internet use to a location. North Korean hackers used VPNs to obscure their locations while setting up accounts on Binance to launder stolen crypto in 2020, Reuters reported in June.

Mehdi Qaderi, a business development worker, said he used a VPN to trade around $4,000 worth of crypto on Binance in the year to August 2021. “All of the Iranians were using it,” Qaderi said of Binance.

In a 2021 guide to how sanctions applied to crypto firms, the U.S. Treasury said sophisticated analytic tools existed that could detect IP address obfuscation. Crypto companies could also gather information to alert them to users in a sanctioned country, it said, such as from email addresses.

“Crypto exchanges would be expected to have these types of measures in place in order to comply with sanctions,” said Syedur Rahman, legal director at Rahman Ravelli law firm in London.

Binance itself had supported the use of VPNs.

Zhao, Binance’s CEO, tweeted in June 2019 that VPNs were “a necessity, not optional.” He deleted the remark by the end of 2020. Asked about the tweet, Binance didn’t comment. In July the following year, Binance published on its website a “Beginners’ Guide to VPNs.” One of its tips: “You might want to use a VPN to access sites that are blocked in your country.”

Zhao was aware of crypto users circumventing Binance’s controls in general. He told interviewers in November 2020 that “users do find intelligent ways to get around our block sometimes and we just have to be smarter about the way we block.”

((reporting by Tom Wilson and Angus Berwick; editing by Janet McBride))

LONDON (Reuters) – Central banks will have to make “fundamental” decisions on cross-border access for a digital version of their currency to serve as a means of payment effectively, a committee at the Bank for International Settlements said on Monday.

“Central banks must make critical choices on the access of non-residents and foreign financial institutions to central bank digital currencies (CBDCs), as well as ensuring multinational interoperability, to fully harness the potential for CBDCs to enhance cross-border payments,” the BIS committee said in a statement.

(Reporting by Huw Jones; Editing by Catherine Evans)

MOSCOW (Reuters) – Russia’s dominant lender Sberbank on Saturday said it had carried out the first digital financial asset transaction on its own platform, with its subsidiary SberFactoring executing a 1-billion rouble ($16 million) issue with three-month maturity.

The Bank of Russia has long voiced scepticism over cryptocurrencies, but is more open to other digital assets and gave blockchain platform Atomyze Russia the first licence to exchange digital assets.

No.2 lender VTB and fintech company Lighthouse carried out the country’s first cash-backed digital financial asset transaction in late June.

Sberbank, which received its licence in March, said in a statement that digital assets are issued on its platform using blockchain technology and smart contracts.

Sberbank’s platform will soon be available to all the bank’s corporate clients, it said.

Russia is working on improving its monitoring of cryptocurrency transactions and may begin introducing regulation of the industry later this year, officials said this week.

($1 = 62.4000 roubles)

(Reporting by Reuters; Editing by Christina Fincher)

(Reuters) – The world of cryptocurrencies needs strong regulation to be begun to be put in place now before it becomes so pervasive it poses financial stability risks, Federal Reserve Vice Chair Lael Brainard said on Friday.

“It is important that the foundations for sound regulation of the crypto financial system be established now before the crypto ecosystem becomes so large or interconnected that it might pose risks to the stability of the broader financial system,” Brainard said in prepared remarks to a Bank of England conference in London.

In a full-throated speech, Brainard made the case that not doing so would store up problems for the future and said that until there are robust guardrails for crypto finance, bank involvement might further entrench a “riskier and less compliant ecosystem.”

The risks of loosely-regulated cryptocurrencies and stablecoins, which exploded in value during the COVID-19 pandemic, have come into sharp focus with the crypto market slumping sharply and the downfall of major “stablecoin” terraUSD. Leading cryptocurrency Bitcoin has dropped more than 75% from its all-time high over the past seven months.

Brainard noted that cryptocurrencies are highly vulnerable to deleveraging, fire sales and contagion and argued that new technologies and financial engineering cannot alone transform risky assets into safe ones.

National and international cooperation would be needed, Brainard said, to ensure compliance with existing regulations and tailor new ones, in particular in the area of decentralized protocols and platforms.

“Future financial resilience will be greatly enhanced if we ensure the regulatory perimeter encompasses the crypto financial system and reflects the principle of same risk, same disclosure, same regulatory outcome,” Brainard said.

She added that a U.S. central bank digital currency, which she has shown support for, could help financial stability “by providing the neutral trusted settlement layer in the future crypto financial system.”

(Reporting by Lindsay Dunsmuir; Editing by Chizu Nomiyama)

(This content was produced in Russia where the law restricts coverage of Russian military operations in Ukraine)

MOSCOW (Reuters) – Russia’s financial monitoring agency, Rosfinmonitoring, said on Friday it was using software to track cryptocurrency transactions and hopes to improve its capabilities, as Moscow ushers in regulation on what one lawmaker dubbed “cryptomania”.

The Bank of Russia has long voiced scepticism over cryptocurrencies, citing financial stability concerns, and has advocated for a complete ban on trading and mining, at odds with a government keen to regulate the industry.

Russia has already identified specific criminal cases involved in cryptocurrencies, said Rosfinmonitoring’s head Yuri Chikhanchin, adding that the agency wants to improve its systems and identify transactions and blockchains that are currently hidden.

Chikhanchin said it was not currently possible to cover everything, partly because not all countries are so eager to regulate the industry.

“It is very difficult when cryptocurrency accounts go into the unregulated zone and we don’t understand who is on the other end,” he said. “But I think we will still solve this task.”

The blockchain technology on which cryptocurrencies are based records transactions, but not the identity of wallet-owners, making them difficult to track.

Anatoly Aksakov, head of the financial committee in Russia’s lower house of parliament, on Thursday said draft legislation on regulating cryptocurrencies would be put to the house in the autumn.

“Obviously there will be strict regulation,” Aksakov said, comparing “cryptomania” to addiction in the gambling sector, which is tightly regulated in Russia.

“The same needs to be done with crypto exchanges and trading,” he said. “The phenomenon exists and it cannot be ignored.”

The crypto industry has been in the crosshairs of regulators, who worry that a recent meltdown in the volatile market could hit the broader financial sector.

The slump – sparked by the downfall of two major tokens in May – has led to crypto lender Celsius pausing withdrawals and Singapore-based crypto hedge fund Three Arrows Capital entering into liquidation.

Russia’s central bank has said it is open to allowing cryptocurrencies to be used for international settlements and has approved other digital asset transactions.

Aksakov also expects a cryptocurrency mining law to be considered soon, an area the government hopes to tax.

Unlike payment companies, most crypto exchanges initially rejected calls to cut off all Russian users, sparking concerns among U.S. lawmakers that digital assets could be used to evade Western sanctions on Moscow over its actions in Ukraine.

Major exchanges said they would comply with sanctions by blocking sanctioned users. In April, Binance froze deposits and trading for Russian users with crypto assets of more than 10,000 euros.

(Reporting by Reuters, Editing by Louise Heavens)

LONDON (Reuters) – Global rules would allow central bank digital currencies to operate smoothly cross-border and speed up wholesale payments, a think tank backed by the City of London Corporation said on Friday.

Most central banks, including the Federal Reserve, the Bank of England and the European Central Bank, are studying the potential launch of a digital version of their currencies.

Britain has said any digital version of sterling would not be available under the second half of this decade, while the Fed has said a digital dollar could help maintain the greenback’s international standing.

“Key to realising the full potential of CBDCs is ensuring that they can operate across different markets to facilitate wholesale cross-border payments,” said Kay Swinburne, chair of the International Regulatory Strategy Group, a think tank backed by the City and TheCityUK.

“Global regulatory principles and collaboration will be needed to realise this vision.”

The IRSG said in a report https://www.irsg.co.uk/publications/irsg-report-the-use-of-central-bank-digital-currencies-cbdcs-in-wholesale-markets-2 published on Friday there are many benefits to including CBDCs in wholesale digital payments if they are made “interoperable” for cross-border transactions.

Harmonisation of rules would allow firms who are licensed in one jurisdiction to provide services in another, and stop countries trying to undercut each other with laxer rules, the report said.

(Reporting by Huw Jones; Editing by Andrew Heavens)

(Reuters) – The U.S. Treasury said on Thursday it had delivered “a framework” to President Joe Biden for international engagement and an inter-agency approach to address the risks and benefits of digital assets.

The framework also directs the administration to promote development of digital asset and central bank digital currencies (CBDC) technologies.

The United States must continue working with international partners on standards for the development of digital payment architecture and CBDCs, according to the Treasury.

“Uneven regulation, supervision, and compliance across jurisdictions creates opportunities for arbitrage and raises risks to financial stability and the protection of consumers, investors, businesses, and markets,” the Treasury said in a statement posted to its website. (https://bit.ly/3P8jIHr)

The Treaury also said it will continue to work with various organisations, including the G7, G20, and the International Monetary Fund.

(Reporting by Juby Babu in Bengaluru; Editing by Kenneth Maxwell)

NEW YORK (Reuters) – A former investment manager at Celsius Network sued the crypto lender on Thursday, saying it used customer deposits to rig the price of its own crypto token and failed to properly hedge risk, causing it to freeze customer assets.

The complaint said Celsius ran a Ponzi scheme to benefit itself through “gross mismanagement of customer deposits,” and defrauded the plaintiff KeyFi Inc, run by the former manager Jason Stone, into providing services worth millions of dollars and refusing to pay for them.

Celsius had no immediate comment on the lawsuit, which seeks unspecified compensatory and punitive damages and was filed in New York state court in Manhattan.

Stone’s accusations follows Celsius’ June 12 decision to freeze withdrawals and transfers for its 1.7 million customers because of “extreme” market conditions.

The Hoboken, New Jersey-based company later hired advisers on a possible debt restructuring, which reportedly could include a bankruptcy filing.

Crypto lender Voyager Digital Ltd filed for bankruptcy protection this week, while the crypto hedge fund entered liquidation late last month.

Celsius promised retail customers outsized returns, sometimes as much as 19% annually.

But Stone said Celsius struggled to pay investors because it failed to hedge investments, resulting in “severe” losses as the values of different coins fluctuated.

He also accused Celsius of logging some deposits onto its books on a U.S. dollar basis even if it paid customers with bitcoin or other tokens, causing a $100 million to $200 million hole that it “could not fully explain or resolve.”

According to Thursday’s complaint, Stone, largely working without a written agreement, generated $838 million of profit for Celsius and KeyFi before costs and overhead from August 2020 to March 2021, with KeyFi entitled to 20% of net profit.

Stone says he exited the relationship in March 2021 after it became clear that the hedging issues “could be financially ruinous” for Celsius and damage KeyFi’s reputation, but that Celsius has refused to recognize his resignation.

The case is KeyFi Inc v. Celsius Network Ltd et al, New York State Supreme Court, New York County.

(Reporting by Jonathan Stempel in New York; Editing by Leslie Adler)

(Reuters) – The Federal Deposit Insurance Corporation is looking into Voyager Digital Ltd’s marketing of deposit accounts for cryptocurrency purchases, the Wall Street Journal reported, citing people familiar with the matter.

Voyager did not immediately respond to a Reuters request for comment.

(Reporting by Mehnaz Yasmin in Bengaluru; Editing by Shailesh Kuber)

By Carolyn Cohn

LONDON (Reuters) – Britain’s Investment Association on Thursday called for the government and regulators to give the green light to tokenised funds using blockchain technology, which could make it easier for retail investors to buy illiquid assets.

Tokenised funds split their assets under management into fractions, enabling a reduced minimum investment, making them more affordable for small investors.

The use of blockchain technology, which underpins cryptocurrencies, to support tokenised funds can also reduce operational costs, industry specialists say.

“With the ever-quickening pace of technological change, the investment management industry, regulator and policymakers must work together to drive forward innovation without delay,” said Chris Cummings, chief executive of the Investment Association.

The government and the Financial Conduct Authority should establish a framework for tokenised funds to operate, the IA said in a statement.

Regulators should also assess the eligibility of cryptocurrencies in investment funds with well-diversifed portfolios, the IA added.

Abrdn is among major asset managers considering launching tokenised funds.

“We are looking at tokenisation and are currently assessing how the benefits of blockchain technology could be leveraged in the regulated funds space,” an abrdn spokesperson said in an emailed statement.

“Tokenised solutions should provide new ways for both retail and sophisticated investors to access investment products, including in the illiquid space, thanks to lower investment minimums and improved liquidity mechanisms via secondary token markets.”

Fund technology firm FundAdminChain is working with the London Stock Exchange and four asset managers on tokenised funds. FundAdminChain CEO Brian McNulty declined to name the managers.

Investors have since last year been able to buy tokens in a fund managed by private equity firm Partners Group through Singapore digital securities exchange ADDX. Investors can get in with an outlay of $10,000, rather than a typical minimum of $100,000.

However, the global Financial Stability Board has warned that tokenisation still leaves retail investors exposed to any underlying illiquid assets, like commercial property and private equity, which are hard to get out of in a hurry if prices fall.

(Reporting by Carolyn Cohn, editing by Huw Jones and Bernadette Baum)